Severn Trent Water "It's all perfectly legal"

[JohnD]

"One of England's top-rated water companies is using an accounting trick to artificially inflate its balance sheet by more than a billion pounds, BBC Panorama has discovered.

Severn Trent Water claims that an investment is worth £1.68bn in its accounts, when in reality it has no value to the overall business."

Major water company uses accounting trick to inflate balance sheet by £1.68bn

A substantial Severn Trent Water investment is based on IOU notes - BBC Panorama finds.

www.bbc.co.uk

"The complex accounting trick started in March 2017 when a shell company, with no money or assets, called Severn Trent Trimpley was set up as part of the group. Another Severn Trent company called Severn Trent Draycote - which owns the water company - agreed to buy Trimpley for £2.

Trimpley then issued additional shares and Draycote bought them for a staggering £3bn.
No money actually changed hands, however, as Draycote paid Trimpley with a £3bn loan note - effectively an IOU. But, on paper, Trimpley immediately appeared to be worth £3bn because it had the IOU.

Severn Trent Water then acquired 49% of Trimpley - and that investment was valued in the water company's accounts at £1.47bn. A hugely valuable asset appears to have been created for Severn Trent Water out of thin air."

 

[JohnD]

"Since Trimpley was added to the accounts in 2017, Severn Trent Water Ltd has paid out £1.615bn in dividends.

Profits over the same period were £1.246bn, so Severn Trent Water has paid out £369m more than it made in profit during that period. It looks like cash is being drained from the regulated water company. "

 

[JohnD]

"The Trimpley investment is now valued at £1.68bn in the regulated water company's 2023/24 accounts.

Those accounts were audited and signed off by Severn Trent Water's directors. When referring to the Trimpley investment, the accounts say: "In the opinion of the directors the fair value of the company's investments are not less than the amount at which they are stated in the balance sheet."

While that may be technically correct, the £1.68bn value is based on an IOU that is ultimately backed up by Severn Trent Water itself."

 

[JohnD]

If they put as much effort into running a water company, as they do into fleecing the nation, our seas and rivers might not be full of sewage.

 

[Mottie]

Do you know how to edit a post?

 

[Odds]

But some of Severn Trent's customers are unhappy. The Shrewsbury-based campaign group Up Sewage Creek wants more of the company's earnings to be used to combat pollution in local rivers. "They've not updated the infrastructure, they've used our money to enrich themselves and enrich their shareholders," one of the campaigners told us.

Toobloody true they're not. We pay above average for their services and this scheme just takes the proverbial, as far as i'm concerned. When much of the heavy industry was moved abroad the River Derwent became claner than anyone had seen it in living memory, though the amount of effluent being poured back in at our expense stinks to high heaven, on every level.

 

[Murdochcat]

People with strong opinions should stop running up unnecessary threads and stand for parliament

 

[wobs]

People with strong opinions should stop running up unnecessary threads and stand for parliament

Do you feel strongly about that?

 

[Murdochcat]

Do you feel strongly about that?

Yes I do. The forum seems to have a proliferation of people intent on inciting some posters to rant at them which can ruin the intent.

 

[JohnD]

Yes I do. The forum seems to have a proliferation of people intent on inciting some posters to rant at them which can ruin the intent.

You're only saying that to try to cause an argument.

 

[Murdochcat]

You're only saying that to try to cause an argument.

Absolutely not. I don’t have 93028 posts

 

[Brigadier]

93028 posts

Lorra bullshoite to be called out

 

[blup]

.

 

[motorbiking]

The key bit missing is why?

They have not invented money. They created a debt vehicle.

 

[JohnD]

The key bit missing is why?

"The made-up money makes the company appear more financially robust and helps to support its bumper payouts to shareholders."

"So why do it? Severn Trent told the BBC that Trimpley was set up to allow the water company to legitimately account for future earnings, but that it has never been used for that purpose.

Another possible explanation is that Trimpley helps support increased dividends.

As well as bolstering the balance sheet, the made-up £1.68bn has also been added to Severn Trent Water's retained earnings - that is the pot of money from which cash can be paid out to shareholders. The more money there is in that pot, the easier it is to justify large dividends.

Since Trimpley was added to the accounts in 2017, Severn Trent Water Ltd has paid out £1.615bn in dividends.

Profits over the same period were £1.246bn, so Severn Trent Water has paid out £369m more than it made in profit during that period. It looks like cash is being drained from the regulated water company."